7. GDP and CPI

Question 1

4 actors (circular flow)

Answer 1

1. households
2. gov
3. firms
4. rest of world

Question 2

markets (circular flow)

Answer 2

• financial
• factor
• goods/services

Question 3

GDP (equation)

Answer 3

+ gov purchase
+ investment spending
+ consumer spending
+ exports
- imports

Question 4

how to calculate GDP?

Answer 4

1. total sales (value added: total sales - intermediate goods)
2. total spending (aggregate spending)
3. total income

Question 5

aggregate spending

Answer 5

(total spending)
+ consumer spending
+ gov purchases
+ exports
- imports

Question 6

domestic production (equation)

Answer 6

+ consumer spending
+ investment spending
+ gov purchases
+ exports
- spending on imports

Question 7

market baskets

Answer 7

(consumption bundles)
set of consumer purchases of goods/services (oranges + lemons = citrus)

Question 8

price index in a given year (equation) (info)

Answer 8

market basket cost GIVEN YEAR
———————————————- X100
market basket cost BASE YEAR

• basis for measuring inflation